a conversation shouldn't require hanging the threats of a government shutdown or economic chaos over the heads of the american people. >> there's going to be a negotiation here. we can't raise the debt ceiling without doing something about what's driving us to borrow more money and to live beyond our means. the idea that we should continue to spend money that we don't have and give the bill to our kids and grandkids would be wrong. good morning, everybody, and welcome to "squawk box" here on cnbc. let's get right to the news of the morning. president obama will nominate fed vice chair janet yellen to run the central bank. current chairman ben bernanke's term expires at the end of this year. the dovish yellen is seen as

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continuing his policies. yellen is expected to be confirmed by the senate, although she has her critics on capitol hill. senator corker will be our special guests coming up at 8:00 a.m. eastern time. the other major story out of washington, it is day night of the government shutdown. president obama and speaker boehner trading words once again yesterday. a very briefly phone call where they basically figured out they had nothing to say to each other. . the uncertainty was enough to send stocks down about 160 points for the dow industrials. futures are indicating a bit of a bounceback. do i dow features up by about 48 points. we will see what happens as we get into the trading day. it is the very short-term treasuries that people have been watching very closely.

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we're going to talk more about this with mark a little later this hour. andrew. >> thank you. on this very topic, a number of individuals in countries and organizations continue to speak out about the situation in washington. the bank of japan is warning this would create a severe blow to the global economy. so far, a lot of people saying that, but it hasn't happened yet. we will see. notable house budget chairman paul ryan is heading pretty interesting op-ed in today's "wall street journal." he's calling for president obama to negotiate on debt ceiling deals as president reagan and clinton did with their opponents. ryan argues for entitlement reform in exchange for the appeal of the sequester cuts. he writes in part this, for my democratic colleagues, the discretionary spending levels are a major concern. and the truth is, there's a better way to cut spending. we could provide relief from the discretionary spending levels in the budget control act in

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exchange for structural reforms to entitlement programs. the former vice president has been been speaking publicly about the current fiscal debate in washington. it's pointing out it does not mention obama care. what do you make of that, mr. kernen? >> i wasn't thinking about that. i know the president didn't talk about -- i don't think there was a single question yesterday about obama care. i am not necessarily an optimist at times. >> it's still morning in america, joe. don't forget that. >> it's always morning in america. and it started with sperling and raise it a little after that. the "new york times," this is the paper of record, andrew, as you tell me the every day. he raised the possibly, the president did, or raising the debt limit in the short-term to allow negotiations. what's the difference if they

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insist on negotiations before doing it or doing it for a period of time to usher in a period of negotiations? >> paul ryan is make raising some interest questions. >> the only reason the president would do it short-term is if the -- if that's what everyone wants to do. you probably barely scratch the surface of what needs to be done. >> why would you do that next week and not this week? because both sides are entrenched in their positions where the president says i'm not going to do this with -- i don't know which met for to use. they're all bad when you talk about the president. bombs stopped to people. but he's not going to be extorted is what he's saying.

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and the republicans would say, we're going to address these long-term issues. i don't see any way to do it unless you get six senators on the republican side to go along with the senate bill which forces boehner to say, all right, go ahead and vote on it here and you get 20 republicans in the house. maybe that will work. i don't know. >> you'd have to begin that conversation -- you'd have to -- if you're the president, you're only going to engage in that conversation and decide you're willing to postpone the debt ceiling if you believe there's something to be done in that negotiation. >> he does, though. as soon as you raise it, i'm willing to do it in earnest. why don't you do it for a period -- there's not that much difference. it's kind of like everybody gets the win if you do it that way. >> if you get there. >> the only thing is, the last time we did it, we set up a

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super committee and gave them a certain amount of time. >> something did happen and sometimes that's the way it works. the sequester did happen and we did cut the deficit in half. now the president, every time he speaks he says i cut the deficit in half. >> interesting that paul ryan is like, look, the sequester is the wrong way to do it. we can find a smarter way. >> i don't know who to listen to on that side. a bunch of them have vying for -- i haven't heard from ryan in a while. i don't know. in corporates, we have to talk yellen. andrew, you couldn't sleep all night, i'm sure. >> all night. >> and what a surprise. >> you know what we need to do? i said this in makeup. we've talked for six months about what would happen. and we don't really -- we probably do the same stuff as bernanke. and now we can talk about what

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will happen. and now we've got another six months. >> i did learn some things this morning. >> did you know she was a brooklyn native? i did. she went to brown university, then yale as graduate school. >> i have one stat for you, which is my favorite. everybody she's a compromiser. she fought successfully with alan greenspan, 1996. there was only two votes -- about lowering rates, right? >> no. it was actually about a regulation. only twice was there a battle on the fed against something that he wanted. and she was the won who won. >> we found that out, too, that she likes regulation a lot, right?

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>> she thinks regulation is necessary. >> there will be some people on the very far left, i think they're going to like her, anyway, who may argue and i think they're going to get some of this that you missed the financial crisis, too. right? she was out there. >> but we all did. the other thing is, the market is up today. >> fill her up. we few she was coming. >> but it would because qe will never end, theoretically at this point. >> actually, there are some people who said this is good news for bonds and stocks. >> but the reason i said that didn't count, because we knew that was going to be her, except for one day. donald kohn. i feel bad for the people that said they were hearing that. >> why do you think the dow fierchs --

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>> i think the dow futures are up because there's a glimmer of hope that maybe we -- that would work. for me, it's fine. and then you do -- you know, you negotiate just even pretend you get something about long-term rates. >> you really don't want to go to washington next week. >> i don't want to go to walk next week. and i don't want -- i don't like, you know, 14-7 when we're finally -- the market is finally doing okay and i don't want you to -- >> you start seeing what it means to not have the government around. there was a story yesterday in "the washington post" about a woman, a 29-year-old, who can't get into the cancer trial treatments. for $10 million that a hedge fund manager, he's given for head start -- >> did you hear about the salmonella outbreak? >> because of the food centers? >> in chicken and there's only a third of -- >> i think two-thirds have been furloughed. so now there's a big issue of how are they going to deal with that?

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>> i had dinner last night with an old friend of mine from college who is a federal prosecutor. >> i thought you were going to say you ate chicken. >> no. both of them with federal prosecutors and working and don't get paid. it was interesting because they were talking about they have mortgage payments and things and they said we don't get a check to do this. >> was this a nobody that you had dinner with? >> what, a really great old friend -- >> you still have time for your old friends? >> i have to re-evaluate. i thought if it wasn't charlie rose or some major taught leader -- yes came over, we had sushi. i said you're not getting paid right now, i have to pay for the sushi. >> you know what that means? >> what? >> now that i said it here, you're not going to be able to expense it. i bet you have the receipt --

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>> no. are you kidding me? i used something called seamless web. do you know what that is? >> did you use wave to find the restaurant? >> something like 7% of new york expense accounts are now using seamless, too. >> i don't know about expense accounts, you can order the food on your iphone. on my way home yesterday, i ordered the food and it came. >> it is something like 7% of all court accounts in new york are going seamless, which is more than mcdonald's or starbucks. which is interesting. >> i don't know what that is. i do know -- did you see the tigers? >> not at the zoo. we have to bring john hard woodz into the this conversation. john, we could talk about a lot of things. why don't we put it into this perspective -- >> i'm going so tart with three words, andrew. >> yes. >> joe is right. >> on which piece? >> on the fact that we are beginning to see the glimmer of

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where this thing gets unstuck. that is that the president, in his news conference, talked about a short-term extension. he talked about adding a list of things that they want to negotiate on, allowing reid and boehner to work out some sort of negotiating process. and, yeah, he had a lot of tough words in his news conference, but that was the take away, to me. and boehner had his news conference, he also had tough words, but he said basically the conversation has to start right now. that's consistent with the solution that we were just talking about. and i think that we are starting to get to a zone where they can -- they can figure their way out of this. and i talked to one of the speakers afterwards and i said, am i right about where this thing is going? and the response was possibly. screwed up any which way, i do

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think that joe is correct to the glimmering of a situation. i assume that harry reid is going to try to pass this clean limit debt limit bill. if they pull that down and that effort stops, you'll know they probably talk about this alternative. i was hopeful yesterday. >> the one thing that -- about the obama administration, they are -- they stay on message. and anything that they say, you know, unless it's biden, it's probably not an accident, or kerry, i guess. but in this case, when he said that, john, he knows exactly what he's doing. that wasn't something he thought

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of right on the spur of the moment. there's a side to -- >> i want to know what -- if this does happen, it gets fixed, i'm back to -- it's crazy stand. >> i'm going for the bengals game. >> we're very cloes up to do deadli deadli deadline already. >> maybe we should just talk about yellen or something. >> do we get through the weekend before this conversation happens in earnest? >> which conversation? about the solution? >> yes. >> slew the negotiating process or the actual negotiations?

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>> monday, tuesday. >> okay. >> 9:00 and 7:00. >> is there a take away in terms of the timing related to all this? >> you know, you have to do it sometime. they're running out of time. i think they finally decided they just need to get it done. >> will there be an argument about how dodd this short-te short-term -- >> sure. and the speaker is going to get attacked from the right for this solution while he's making it. you're going to hear from -- and that's what i thought his tough talk yesterday is protecting himself against people on the right saying he's selling out, he's not getting us anything. >> and the president will get

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attacked because it will say that they can do it again in three months or six months or whatever and it doesn't really -- >> yeah. >> but that's part of the deal. both sides will be a basis no matter what. >> and he talked in his news conference about unconditional surrender. now you don't want to think about that too long. it's surrender to agree not to harm it, you're pleading guilty to that whole extortion thing. but set that aside. the speaker will be in a position to say, i didn't surrender. we have budget talks. the administration is you cannot dictate the end of the talks before the talks begin. so as long as the administration can say to their own side, we

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have not -- and to itself, really, for the purpose of the precedent for future presidents, as long as they can say they agreed to raise it and we didn't give them a concession, we gave them a process concession, i think that's an exit ramp that they can take. i think if it really did happen, i think be careful what you wish for boous because historically he'd be the first president where it happened. and even though you sort of have the blame cast on the republicans, that's not a way to do it. and it's in no one's interest to let this happen when it comes right down to it. >> honestly, no serious person really wants -- there's some in the tea party who think it's -- take it out for a spin, it's not

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going to be that big of deal. but no serious person in either party wants it to happen. >> you saw the times piece, there's a bunch of guys that say it only costs this much money to do this, this guy from north carolina, we always have enough money to pay our debt service because of the tax revenues. >> that's like walking around with a match around a gas can and saying, i wonder how close you can get to this gas can. >> or walking around with nitroglycerin and saying, no, i won't stumble. john harwood. >> feel better? >> a little better. he's optimistic. i'll take it. coming up, we're going to talk about why jpmorgan could be reducing business clients. may actually be a good thing, not a bad thing. plus, if you have a million dollars or so to spend, naeem yam marcus has the holiday wish list for you. "squawk box" comes back right after this.

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time now for the executive edge. this is a daily segment foep focused on giving business leaders a leg up. payday lenders, check cashers and certain car dealerships. the bank has launched an internal review of its commercial lending clients and it's said to be looking to tighten controls in a period of

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tightened regulatory scrutiny. guys, this may not be incredibly new news. it's timely with what's going on. but i think jamie dimon has been talking about this since february with regulators starting to crackdown. >> it's the fun companies like pawnsh pawnshops, you see why they're located and stuff and the sleezy car dealers. you know who got his line cut off, fortunately? >> who is that? >> sol. >> he was dealing with jpmorgan. i'm still in the middle of that series, so i can talk about sol. >> you think of walter white as a client? >> of sol. and i think sol is the middleman. >> better for jamie to get out of that business. >> completely, right. and not have anything to do with sol. >> did you see how much money this is? >> what is it, a couple hundred million dollars or something? >> yeah. and someone wrote about a blog post that it's about hurting the

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economy, that banks cut off these people off. >> the shadow banking industry has gotten bigger and bigger. and you do wonder how people who are on the edges of society are going to be able to get credit at this point. this is always a question, when things are too loose, you worry about who they're lenning to. >> it's a legitimate issue. >> that's definitely a part of the overall economy. probably a significant part. >> right. and it's gotten to be a bigger part. i read something about the shadow banking system, how much it's groan over the last five years. >> and the question is who picks that up. it's not just that the big falls apart.

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walking dead, coming up against this weekend. >> you have to get on board. >> i have to get on board. >> the orange is the new blue is your thing. >> no. and i'm slightly giving up on -- i'm told the three and four are better than the one and two. >> i'm going to waste too much time here. guess what i watched? >> what? >> blacklist. and i liked it. and it's on nbc. >> it's unbelievable. james spater. so he's been great in everything. he's pretty in pink he was great. he was great on seinfeld. >> i'm behind on this because "the voice" goes right up and to it. >> mike, the guy that was -- the main guy's wife that was close to the family, he is one of the stars of blacklist, which is always confusing to me. it's like, i thought you were on

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"homeland" why are you on "blacklist." but he is. spater, remember him in the jack nicholson werewolf movie. he's good. he is. >> all things "d" reporting that apple will hold a fall ipad event on october 22nd. among the highlights is the fifth generation ipad. it's expected to feature a thinner, lighter design, an improved camera. no word on whether these new devices will incorporate that touch i.d. fingerprint sensor, the one that recently debuted on the iphone 5s. i guess this is good news. new products out there just in time for the holidays. >> the question is, is that revolutionary? and i'm told it's smaller and lighter. >> thinner and lighter, yes. >> i thought we learned they don't need to be. >> they don't need to be. people buy them, anyway.

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>> i would upgrade my ipad right now. but the mini, which you have, they won't go to the retina screen. >> i thought they would. >> there's a rumor out there that they may or may not be able to get it going this time. >> i heard it's the opposite. >> do you think if they get the fingerprint down to where it's perfect, do you think everyone will upgrade to a fingerprint thing? >> every will copy or try to. >> but will you need one? will everyone want one? >> it's going the draekz. >> i spoke to someone in the business who said they were anxious about the fingerprint business. they said people you may not be happy ultimately that your b

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biometric notice is floating around. >> who is this, someone we all know? >> i will tell you during a commercial break. >> viewers, you're left out. anyway, it is never too early to start thinking about holiday shopping. if you were looking for something special for that person who hates all, check out the newly released nae erelease christmas book. the most straf gaf selection is a giant distinguish that emerges from an underground storage place, speakers and the price is $1.5 million. there's a diamond for backside $1.8 million. and then a cruise off the coast of nambia, where your diamond was mined from the osha yab

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floor. for the kids, how about an edible gingerbread life sized play house for $15,000. >> we have juan of those in our house. >> right. really? >> this is how we shop for christmas at my house. one of those, one of those. >> a lot how much of this stuff bsh it's like a pr thing. you know, two dinners with the ceos is like $800,000 less than that if you have to have dinner twice. >> the diamond is focus. what's a dinner? >> yeah, right. there is a fall conthing which i was looking at. >> this is gross conspicuous consumption, though. >> if you were out in the hamptons is a hedge fund guy with $20 billion and you're having a party and you wanted the screen to come up and just show pictures of you to feel even cooler about it, you feel

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like you're even a bigger hedge fund guy, you might do that. can you imagine? >> and i would definitely wonder what you're compensating for. i don't think anybody actually buys these things. >> no, i don't think so. when we come back, today's agenda, the events you need to watch. first, though, check out shares of costco. retails earnings falling short of estimates. "squawk box" will be right back.

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welcome back to "squawk box" on this wednesday. it's time for today's "squawk box" planner. it's going to be right over here. on the economic agenda, minutes from the last fomc meeting will be released at 2:00 eastern time this afternoon. obviously, details about december's no taper decision will be closely analyzed as the corporate events check out this, nike holding an investor day in oregon. if you're questioning why this would be notable, on the company's last investor day in 2011, the stock price declined in the month leading up to the meeting. but then it reversed itself.

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it increased 10.1% on the day of the event. we will see whether it happens similarly today. hp holding an analyst day of its own. the company's business is shrinking. with revenue declining on all of its major categories in the most recent categories. in an e-mail, ceo meg whitman said they should take the removal from the dow personally. but the stock is soaring. rising 38% this year. that is your "squawk box" market planner. can you see it like that? >> it was very nice, very vana white. >> very vana, yes. >> andrew, thank you. if you want to know what investors think about the situation in washington, check out the treasury yields on the short-term. the one-month t-bill spiked to levels not seen since the financial crisis. it hit a five-year high of 1.62%. it peaked over 5% back in 2007. marco cotta is cofounder and chief investment officer of

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highland capital manage. we're taking attention to these things. these are still relatively slow moves. >> it's at 0.23. which is the highest level since the crisis when it was five. >> right. >> but if it's 0.23 -- >> i don't want to overhype this. it is creeping back up. we have seen a big jump over the last week, but we're talking about the -- >> well, of course it's something to watch, right? there's some signs of some issues that people like worrying about where the u.s. is going and what's going on here. i'm worried about it. i can't believe it's going on. it's absolutely ridiculous the dialogue we're supposed to be having here. they're missing around with things that make it very difficult for investors, as you said, to do their jobs, which is really to try to figure on out what risk is. when you put risk in the risk free rate, wa do you do? how do you price things? >> so what have you done?

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>> we typically, when the market gets very uncertain, credit investors tend to make good money and buy things. because we have cash flow and coupons and maturities and things that help us get through periods like this. so if we can pick up good risk, a cheap risk at a time when people will panic, that's fine. however, it's certainly not a comfortable feeling when you're out there buying stuff right now. >> what are you buying? can you tell us specifically? >> we buy photo secured debt. it's been very good. the returns have been night. they've held up, it's been pretty stable this year. we just finished our 20th year in the business and it's been good to be doing loans 20 years. we did a study, look at the space, and loans do really well in periods when the markets are fairly uncertain when oftentimes when rates are rising. i'm not sure that rates really start rising from here. i think we're going to have a period of volatility around

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rates that's push and pull around all the liquidity we have in the world flashing around. and then it's growth. they're trying to throw a big bucket of cold water on. but hopefully that keeps growing and we see rates rise because of that and loans are a great place to be because of that. >> the stuff you're buying this week, is that on the assumption that we will not default on any debt as a country? >> we don't see a default. it's something that is unthinkable as far as the ramifications of that. and so risk managing around something like that is really impossible. it doesn't matter what you really owned or didn't own in a period like that. we would see most of the market go haywire. >> and it's not unthinkable. we have been thinking about it. >> we think about it, but what are you really going to do about it? >> it's unthinkable that we default. it's not unthink that we go over the deadline. the question is what does this deadline represent? can you go a day or two or three

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and what does that mean for the markets? are you holding cash on the assumption that maybe next week you'll be able to go to town? >> oh, yeah. i've got plenty of cash. >> it's a one-month bill of cash. >> it's even cheaper. you're earning a bit more. about the uscd as we were talking about, small moves that maybe meaningful, the cds went from 22 basis points to 38 basis points in a week. percentagewise, that's a lot. >> but if everybody is sitting around with the same assumption that we don't go over, and everybody is sitting around with cash thinking, you know what? when the market goes down, i'm going to go to town and everybody is going to go to town and, therefore, it will never go down and, therefore, this opportunity won't really exist. >> that's right. but the reality is that they are dealing with things that are unknown. we were still in a situation where the fed intervention has been a giant experiment. and we haven't seen this really deal with it. >> but you said you were happy about yellen because it remofts

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uncertainty. but once of the things that you say is the confidence has been damaged by an overreaching fed. so it's going to continue to overreach. >> when bernanke didn't start the taper a few weeks ago, i felt like, wow, maybe this is yennel talking. but it's unbelievable that he would tee the markets up. you tell your kids, hey, we're going to go to the doctor next week, you have to get some shots. >> and they get used to it. yeah. no, no. >> they get used to do idea of it. >> and then you don't go. it's crazy. and the confidence that you lose as a parent and as someone who is trying to guide the country as an adult, i mean, these people are really the only adults in the room right now. >> and the kids aren't going listen the next time around. >> they start to doubt the whole system. and so the volatility i think i talked about the last time we were on the show, we're seeing

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it now. the vix is up 15%. i think you've got to figure out ways to really buy good risk right now. i don't think i'm missing anything. we're having a great year. all the markets are up big, right? so it's not like you're sitting on a 2% year or you're down fine. we're up big across the board. so sitting on some cash doesn't feel like a bad thing to do, andrew. >> mark, thank you very much for coming in. >> sure. thanks. >> how much are you managing? >> 18 billion. >> you're not two and 20, are you? >> i wish. no, fees for us are very, very honest. >> how much are you -- are you up over 20%? >> some of our funds are up like that. >> you can see i'm trying to get to your salary. you're smiling, you're happy. >> i heard him describe his fees as honest.

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>> what's 20% on 18 billion? we make good money for our investors and we make good money for -- >> you can have 20% of whatever you make, you -- >> hey, look, if you're talking about tenth of what i'm talking about, it's still -- >> awesome. >> thank you. >> thank you. >> it's a great country. >> yeah, isn't it? >> awesome. anyway, coming up, youngs earnings and revenue missing the mark because of kfc. it will take longer than expected for it's china restaurant sales to rebound. we will tell talk to an analyst who covers yum when we come back. . that's why you take charge of your future. your retirement. ♪ ameriprise advisors can help you like they've helped millions of others. listening, planning, working one on one.

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welcome back to "squawk box." yumm reportederly results after the bell yesterday missing expectations of adjusted earnings of 92 cents per revenue on $3.25 billion. a break down the quarter is r.j. hottabey and retail analyst at morning standards star. good morning to you. >> morning. >> china, is that the headline, the only headline and the top line? i mean, that seems to be the whole story here. >> yeah, it really is pretty much the primary story. management has been guiding to positive comps for the forty quarter in the china region. obviously, that has changed now. the company now expects that they will not be in positive territory by the fourth quarter.

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the september comps were a bit of a disappointment. i think you're starting to see some of the recovery there. some of the marketing efforts they've had as well as some of the value messaging they've had has been working. but i also think the company is now not only cite something of the food related issues, but some macro related issues, as well. i think that is what we're seeing with the pressure on the stock this morning. >> and how long does it last? do you think they can turn this around? >> i think they get the positive comps. i think the austerity measures are prolonging that recovery. >> what do we think of the u.s. business between kfc, taco bell -- >> i think taco bell has been

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one of the positives for this cup. they were up 2% against last year's doe ree toes locos launch. that gives us a lot of encouragement. i think they can take a lot of the product invasions, apply that to kfc and pizza hut. i think it will give them momentum in that business, turn around the kfc business and give them momentum. >> pizza hut, a business that has not been growing as fast on a business. what do you think of that business? >> yeah. that's kind of a mature business. you're citing some heavyweights there. where discounts hag become the norm. i think you're stuck in a low growth phenomenon there.

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although i have you know the opportunity to shift to some more asset type formats that generate larger returns on capital. i think that's the way you monetize that business is smaller formats. higher productivity locations. >> are you thinking about something due to new products? i think the doritos locos taco. what can you do with pizza? >> i think they've been testsing things like sandwiches, pasta. you can do some interesting things with products there. fkc is another one where you've had some product misses over the last couple of years. the double down sandwich, a few other products where it hasn't quite hit the mark. and i think you've got some opportunities there to leverage with some of the brands that yumm is associated with in the past to really generate some buzz over the products. i think that's what's going to get them through this rough patch on their other u.s. brands. >> rrjj, thank you for your perspective this morning. breaking news right now,

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joseph a. banks confirming -- this is the like the way you look, confirming that he had made a proposal to acquire men's wearhouse for $48 per share. we should note the total value of the deal would be $2.3 billion. they say we are hopeful that the men's wearhouse board will accept our proposal. we believe the shareholders would want their board to explore with us the immediate and certain value they would create. as we all know, men's wearhouse has been in a -- >> we'll see if they take advantage of this. probably makes a lot of sense. >> you're going to like the way you look. you might like the way the stock looks, too. >> we'll see what pop pisani says later in the day about this deal. >> he's upgraded. maybe it's the way he put all

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the different colors together or something. i don't know. anyway, the super rich robert frank joins us with a look inside one of the biggest yachtmakers in the world. and then rise above the art of compromise as washington struggles to get theceos about experience compromising for the greater good making the best of the situation. we'll talk to joe etchevarria. stay tuned. "squawk box" will be right back. revolves around your symptoms, ask your gastroenterologist about humira adalimumab. humira has been proven to work for adults who have tried other medications but still experience the symptoms of moderate to severe crohn's disease. in clinical studies, the majority of patients on humira saw significant symptom relief, and many achieved remission. humira can lower your ability to fight infections, including tuberculosis. serious, sometimes fatal events, such as infections, lymphoma, or other types of cancer, have happened.

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the ultimate luxury is a super yacht. robert frank got inside one of the top world makers of mega yachts. >> which one? >> we'll tell you. in the yacht world, fed ship is the name. it's like the roles royce. >> my greatest grandfather had a ship in the village a half mile from here. >> the project we got to see was code named kiwi. they were a year in the construction and a year from completion. the project is going to cost more than $40 million. most of that is man hours.

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we're talking 700 man hours or more to build this boat. that's two-thirds of the cost. fed ship builds boats like venus. they built larry's latest. named after a famous japanese samurai, more than 250 feet long, merely the size of a football field. it's one of the most beautiful, elegant boats ever built. larry down sizing after his 450 feet yacht was too big. for perspective in terms of the arms race for yachts. a time ten years ago, paul allen had the biggest, 415 feet. then larry had 450. then eclipse 536 feet. now a middle east guy comes in with the new biggest 590.

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we went from 414 to 590, biggest in ten years. just amazing. >> i'm trying to get my head around how big that is. >> it's a football field. >> what's the the price tag? >> for which? >> the biggest. >> nobody is saying, but has to be around a billion half billion. running it during the year is an additional 5 $5 or $6 million. do they stay on it once it's moved from port to port? >> most owners stay no more than two weeks a year. you're using a hundred million asset for two weeks a year. it's the ultimate wealth disposal. >> it's like a mobile house. >> it is. >> thank you. don't miss tonight's brand new episode of super lives of the super rich. when we come back, ceos call on

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leaders to rise up to fix the crisis. "squawk box" will be back. [ man ] on december 17, 1903,

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what janet yellen brings to the table. will there be changes in the yellen fed? how will markets react? experts joining us all morning long with opinions. >> this is not about me and frankly not about republicans. >> the president standing his ground. the debt ceiling dilemma creeps towards the deadline. plus the reaction to the latest out of washington,

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democratic congressman as the second hour of "squawk box" begins right now. good morning everybody. welcome back to "squawk box" here on cnbc. we've been watching the futures. you see a bounce back this morning. dow futures indicated up 55. s&p up 7 1/2. we begin with this top story. yellen expected to be nominated today as the next fed chair. now we know she's going to be at 3:00 p.m. steve joins us now with more. he's moving around in his seat jumping around he's so excited. >> it's an interesting story. now we know for sure. listen to what you said at the

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opening of the show. you tried to convince people this was important. off camera you're whispering it's not. >> so sincerely. we spent six months on what she would do and now six months on what he's going to do. >> you know we're on camera now? you're telling people this. play along. >> the president will introduce janet yellen to the world. we're going to tell you who she is. from brooklyn. her father was a daughter. san francisco fed president 40-2010. a fed governor before that. she brings a lot of backing experience here. she was an economist of the berkeley factory since 1980. excellent economics department. let me tell you what i think i know and have come to know over

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the years. he's a firm believer fed can increase employment and output. she sees little inflation concerns, said she thinks interest rates could be 0 through 2016. she has little sympathy with the hawks argument about the concern of inflation. she believes this is the process. she uses optimal policy form. we'll talk a second. she likes rules but not lines in the sand. she sits there and does a lot of mathematical work on what fed policy should be. she doms conclusion and says here's the optimal policy. now be human beings around that rule. she's the author of numerical targets, not lines in the sand. at least this or at least that. she believes the fed policy has limits. i want to show you a quick quote about what she said about the

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fed. she is one to admit the the fed made big mistakes when it comes to the financial crisis. >> she battled and won in 2006. >> over regulation? >> over regulation. >> i vaguely remember that. >> apparently it was one of the two times allen greensman lost. it was a banking regulation. i'm sorry 1996. it was over some type of interest rate related to the banking system. >> i'll look that up. >> it was interesting given that she's supposed to be so -- >> she battled and lost in 95-96 over raising rates because of inflation. she was more concerned than he was. she wanted to raise rates. >> she's not always as dove. >> a dove never thinks they're a

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dove. they believe they're advocating the correct for the policy. >> it's a line in the sand but she really -- it's more like the red line that we talk about now. it's not a real line. >> exactly. >> we should use a red line because we can now. that's a line that doesn't matter. you're going to cross it any way. okay. >> stay here. we're going to talk more about this. joining us to talk about the timing and deadline, a former federal reserve senior economist. also kevin is american enterprise director of economic policy and federal board economist. you worked with her in the past, janet yellen? >> absolutely. back in the 90s. for me the headline is usually the fed chairman is confirmed easily. this is a easy confirmation.

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she's absolutely qualified. getting front of her in the senate would be watching leaseman block will fort or something. not going to happen. >> you think this is the best choice for republicans. you look at everything happening now, do you think there's a chance, katherine, she could run into the circumstances being the circumstances, republicans not wanting to go along with anything the president is going to put out. >> that may be the attitude of republicans. that wouldn't serve the american people or global economy if they were like that putting into place someone that could do an extremely good job. it would be sad. first, has the knowledge, experience, has worked on both administration side the real economy as well as monetary on the central bank. secondly she has a real appreciation for complexity of monetary policy these days. she can work with the research

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staff well known to be the best in the world. this is a global economy. she knows all the central bankers around the world. she can pick up the phone and talk to them. that's important in today's global monetary system. >> we're looking at video of janet yellen bringing down the mic phone. expect a lot of that. >> right. that's an important thing to consider. >> i want to point out that she brings an awful lot of central banking experience, probably more than any of federal reserve chairman ever appointed. the trend here is that more and more of this job is seen as a tech cat. woodrow wilson appointed his neighbor. i'm not sure paul voker would be

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qualified enough. expertise in economic and modelling and all this stuff -- >> you can go back a long way before you find a central banker in the united states that does not have experience in the macro economy. it may not be in the institution itself of course janet has been for a long time. previous central bankers had a lot of experience from the private sector or financial market side. so you kind of have to go back to the last time. >> to have bernanke and yellen now. bernanke being the expert on central bank in the depression and yellen now. it's got to be 10-12 years of experience in the central bank before becoming chairman. >> it's an important institution, most important anyone is going to head. having someone come in vetted and having worked there and linked into the global economy which i think is extremely important. >> i want to go to a different

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issue. she has been one of the major proponents of transparency at the fed. she's on the communications committee, pushed for more transparency. as a result, part of the role of the fed chair now is to be the public face of the fed in a much more important way than before. how do you think the market reacts to her, when the proverbial you know what hits the stand, and she is standing at the microphone that she's going to bring down. new york times called her a little lady with a big iq. they quoted a colleague say that. how does the market react? >> i did see a that. >> the good news is we know how this is going to work. yell opinion has been giving speeches all the time since viet chair and over in san francisco in the fed.

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one of my colleagues read every single speech and started to work up a report on it. she's always you been influential board member. every time she gives a speech it's relevant. she knows thousand do this. i think she's someone who the governors will be comfortable sending out to the news conference after the meeting and so on. she knows how to handle it. in private moments i have a lot of friends that are friends with janet. they'll say in private moment, she right now never ever ever says anything about anything that's current for risks. >> there's one uncertain tichlt as vice chairman you're supposed to go out and do heavy lifting on behalf of the chairman. i don't think janet has been giving speeches about things she doesn't believe in. what she believes separate from the chairman is maybe something we'll discover over the course.

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that's what the chairman has done. you're like a vanguard in that respect. >> she hasn't done that for bernanke. >> i think she has. >> i think quite a bit different. she's got her own opinion. especially if you look at minutes. she's in there pushing her point of view. she's a feisty lady and fighting hard for her views. she was humble in the housing quote. he was the only person at the fed saying this housing thing is going to turn into a mess. she's got things she's been saying that's pretty darn accurate. the one weak point is unpopular in circles. milton freeman proposed we do it. it's something there but not -- >> do we believe the strategy is a good one? >> for sure. >> i'm not sure i agree in the transparency strategy. i think the market wants to have transparency down to the constant or something like that.

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that can never happen in the economy that has so many moving parts. there's an element of the transparency strategy that is unsatisfactory to the market. it's as best can be done in the context of multiple bank presidents and multiple members. it's a half loaf but the financial markets want the whole loaf. we can't give it to them. >> that was a theoretical thing freeman said that. what year did he say that? >> oh gosh back in the 50s. looking at the great depression, it was one of the things he proposed we could do to fix it. >> he said it a long time ago. i thought bernanke came up with that. he didn't say it like yesterday? no. he's no longer living. >> i know. it never happened until the most current -- this is the first time it's been used right? >> the one thing i want to say

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about the transparency. the fed needs to be like the 500 foot yacht we were looking at. i don't want to travel from port to port. that's why i need the helicopter. those things even though big, even on a big ship. >> it takes a long time to turn it. we need to see it coming is all i'm saying. >> and trying to do it in a bathtub. i got it. >> that quote is a small lady with a large iq. i think sounds better than a little lady. >> i think a large iq is good either way. in other headlines this morning, we should take note of a couple of things. a $3.2 billion take over is in the works. joseph a. bank offering $48 per slar in cash. that's a 42% premium to the closing cost of the men's

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warehouse. the founder and spokesman. cost co reporting earnings 6 percent below estimates. it reported a 3% increase in same store saelts after falling short of con ken sus for forecast. j.p. morgan chase cutting back on lending to certain clients. wall street journal saying the bank is conducting an internal review of the clients. types of companies pawnshop, payday lender, check cashiers and car dealerships. it's going to affect him. he's still got his own show. we're going to develop our host for the remainder of the hour. martin sass. yellen's stance on the market and what it means. a big hour with lots of news

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to cover. "squawk box" returns right after this. we've heard from chairman kruger, former white house chief of staff, equisearch if i investment chairman. tomorrow it's another name with big skin in the game. our guest host. on friday, former general electric chairman and ceo jack welch sounds off. "squawk box" where business leaders turn to rise above the washington rhetoric.

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we are back. capitol hill good luck raising market uncertainty. dow has lost 900 points september record high september 18. portfolio manager and ceo has over $8 billion in assets under management. the firm is 40 years old. >> yes. >> and your father was not m.d. sass. >> it's your firm. >> it's my if i were. >> you started it in 1972. >> i was a baby. >> i've known about it since 1982 because it was very well regarded everyone at that point with all my peers.

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>> i want to get to what you do best, that is talking about individual situations. let's get this out of the way with what's happening in washington. you figure 95% chance that it's fixed maybe not by the 17th but doesn't go too far bapast the 17th. >> 95% but not 0% chance of going over the cliff which is scary. >> defaulting. >> yes. >> or some band aid that makes wall street unhappy and causes a riot, there's a 5% risk. >> other than that you're looking beyond this event and business as usual. >> yeah. it has important implication for the stock market and individual names. >> janet yellen change anything? we thought it would be her. >> we teased you would comment on that.

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it's something most in terms of continuity are okay with: >> she's a fellow native of brooklyn which i think makes her a great candidate. >> that's going to be my fact toid. i then said the bronx and messed it up. >> last time you were on? >> july. >> we talked generic drugs. >> i want to see what they've done since july. >> i hope you put it up. >> two of them. activist and myelin. i have a new one today. >> okay here's acta vis. it's october. july it's already moving up. what's the story here? >> it's a tremendous growth story. acta vis was watson pharmaceutical that we bought.

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they changed the name to acta vis. 43 percent of earnings. now they just closed on the warner chill cot another acquisition. a company will grow over 50% this year and grew 50% last year. going to grow double digits over several years and 10 times earnings. stock has been a tremendous winner. >> everyone knows mylan. these were both down yesterday. you'd still buy those? >> yes. major positions of ours and have been several years. we continue to like them. i have a new one for you. >> you do? >> i'm excited.

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>> this is what gets me turned on. >> which one? >> it's been the dog for years and we've avoided it. that is teva. it's the biggest generic company. it's been a dog. the reason is their biggest drug is going off patent and facing competition. >> is that an ms drug. they're troughing earnings currently. those are around $5 a share. stock is seven times trough earnings, 3.4% yield, no expectations. everybody hates it.

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this new respiratory drugs they're spending hundreds off o, should have high to single digit growth. this company is now reaching the point with future growth. 7% earnings, nice potential upside. >> i guess we could say we've done the generics. we've got three or four others to talk about too. >> new ideas. >> you'll be here a little while longer. do we need to get back to -- i was glad he was coming on just not to talk about washington for ten minutes. just to put it out of my mind and talk about what happens if it's fixed. still need to put your money somewhere. we'll be back with martin and

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talk more. coming up, what washington could take away from business leaders to get a deal done on the debt ceiling. chris van hol len recently sending a letter to the house speaker demanding a vote. we'll ask about that the and chances of a bipartisan deal getting done before the the deadline. "squawk box" comes back right after this. ready to run your lines? okay, who helps you focus on your recovery? yo, yo, yo. aflac. wow. [ under his breath ] that was horrible. pays you cash when you're sick or hurt? [ japanese accent ] aflac. love it. [ under his breath ] hate it. helps you focus on getting back to normal? [ as a southern belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. uh huh. [ under his breath ] i am so fired. you're on in 5, duck.

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now the answer to today's aflac trivia question. diana nyad is the first person to swim without a shark cage. how many mimes is it to swim? >>. >> in today's wall street journal calling president barack obama to negotiate on debt

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ceiling deals as reagan and clinton did. he writes in part that for my democratic colleagues, the discretionary spending levels in the budget. in exchange for structural reforms to entitlement programs. the nominee has been not been speaking publicly. many are pointing out this does not mention the words obama care. interesting part and has some wondering if this is a blueprint to get to a deal. up next, the ceo on the art of compromise. we'll get his take on washington. chris van hollen joins us to talk act all of this. much more on what janet yellen brings to the table. we'll take a look on what she may or may not do with the bond

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buying program. "squawk box" will be right back. we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed much is the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪ you want a way to help minimize blood sugar spikes. support heart health. and your immune system. now there's new glucerna advance with three benefits in one. [ male announcer ] new glucerna advance. from the brand doctors recommend most. when you have diabetes like i do,

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welcome back to "squawk box" in the headlines this morning, the government's august report on wholesale trade due today. it's another casualty of the government shutdown. we won't have it for you. several other releases will happen today including the minutes from the most recent fed meeting as well as the energy department look at oil and gasoline inventory. mortgage applications rose 1.3% last week. driven by a 2 1/2 increase in refinancing activity with average mortgage rates dropping 2.4%. yellen if confirmed by the senate would be the first woman to head any major world central bank. >> i think the choice of janet yellen is exciting. she's experienced,

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knowledgeable, familiar with the policies in place. she understands what needs to be done. as she goes through the confirmation process she'll further reveal the strategies she'll bring to the table. >> yellen announcement set for 3:00 p.m. eastern time at the white house. the big headline, yellen to run the world. another headline saying she was going to be the most powerful woman in the world. probably true. pretty amazing. >> absolutely. >> pretty cool. >> you think about the fed chairman. they could be there -- how long was green span? >> 17 i think. >> there was like a bunch of prepondera presidents come and go. some think that's right up there with the president as far as power. i don't know if that's good or bad. a lot of people think we don't need the fed. >> we need the fed. >> all right. president barack obama and

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house speaker john boehner digging in, sort of. although glimmers of what the final deal may look like as you heard john. the government shutdown continues. >> the last time the tea party republicans flirted with the idea of default two years ago, markets plunged, business and consumer confidence plunged, america's credit rating was downgraded for the first time. a decision to go through with hit and permit default according to ceos and economists would be "insane, catastrophic and case i don't say." >> the president's decision we're not going to sit down and talk to you until you surrender. that's not sustainable, not our system of government. >> someone who knows a little

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about this, joe,ceo. he's been participating in the conference calls with the white house. he was in spur ling's office the morning the government shut down. good to see you. >> good to see you. >> it was before the stuff that happened yesterday. you were i would say very concerned something doesn't happen. after yesterday and the notion of some type of arrangement to do a short term fix and begin negotiations, are you still not optimistic at all whether something gets done? do you think now there's light or a glimmer of hope? >> i think there's little bit of a glimmer based on yesterday. this comes and goes on a daily basis. as you know. from my vantage point it's wait and see. one of your guest talked about

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the 5% chance. 5% is a big chance. >> i'm luking at way you're running. it's just sad that you can't run your businesslike you'd like to. the the new abnormal is normal. it affects whether you hire people. how many deloits are there that go into the entire pick clur of what's happening with this recovery and employment? >> if you think about it, in the 17th government shutdown, we're going to hire 18,000 people. if this continues we'd have to modulate down. government contractors have put hiring on hold or furloughed people. you're talking 4-800,000 people unemployed in the environment where we're trying to create jobs. >> exactly. let's try to be optimistic. we're not looking at the rest of the president's administration next three years just going to be this constantly.

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will it be a point where the private sector is only worrying about itself rather than the belt way? >> i hope that's not the case. i'm hoping it will be 95 not the 5% suggest eed previously. ceos, myself, the guest you have on the set today, we have a responsibility not to manage the present but the plan for the future. we need a long term you view around tax, reform, immigration entitlements. that's what we need on a longer term basis. >> that's the thing that's most scary i think. deloit, you know how to do actual you stuff. you're good with numbers? >> yes, sir. >> we're spending too much on people that are in their later years now. there's a lot of obligations that we're putting on our children and their grandchildren if we don't do something.

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this is really important we start making some progress right? >> absolutely. if you cut to the chase here quite simply we need to listen to the will of the people. stop fighting yesterday's elections. we need to move onto solving tomorrow's problems on a long term basis. >> what does that mean? don't bring up the idea of obama care? you think that's worn out? >> the concept of whatever the elections of the past were. let's get to compromise. 17 shutdown, debt ceiling has been raised 99 times since 1940. average of 1 1/2 times a year. it's not unheard of. let's get resolution and down payments if necessary. that's what i mean, time to get on with the business of the future of the government not the past. >> ryan is suggesting republicans would be willing to give up sequestration cuts.

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that sounds like what you're talking about. >> you've got to get to the middle, deal with america's issues not any one side. >> is it going to take a riot on wall street to get policy makers to reach a resolution to the game of chicken going on in washington? what do you think the risks are that we go past the october 17th deadline that the treasury has set? >> i think the risks are higher than i thought before simply because we've gotten use to this getting down to the last minute. i think the risks are a bit higher. there's a view that there's money to pay bills for a while and not going to immediately default on treasuries. i think it will take a riot of the middle class. once you trickle down and affect the majority of americans, you might see a different reaction in washington. >> thank you. you know you're not a politician

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but representing us in a lot of these talks. i don't want to make you nervous but do your best. we appreciate it. things are hanging in the balance. >> remember, i am from the bronx, joe. i'm the one from the bronx. >> i knew somebody was. >> great to see you. thank you. >> take care. thanks for having me. up next, congressman van hollen joins us to talk. and at the top of the hour, boone pickens joins us to find out what he thinks is going on in washington. big decline yesterday for the dow, up 46 points, s&p up 56 points today. "squawk box" will be right back.

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welcome back to "squawk box" democrats and republicans are showing few signs of reaching compromise any time soon. will it take a full blown crisis and financial meltdown to get both sides to rise above? we hope not. joining us democratic congressman. thank you for joining us. >> good to be with you. >> is there a ray of hope? there was a line in the president's conversation yesterday he suggested perhaps if there was a process attached to extending the deadline maybe there was a little bit of a path to getting somewhere. how do you feel about it now? >> there would be a glimmer here. we're on a risky trajectory now. i think there's a possible opening here. again, it depending on whether republicans on the hill are

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willing to jump on it. we've been trying to have a negotiation on the budget since last march when the house passed and the senate passed a budget. we've been trying to get budget negotiations appointed. in the hour, the speaker blocked the appointment of negotiators. senate republicans blocked it. we've been trying to have that for a long time. the president is now saying he's happy to have negotiations. what he's not going to do is negotiate under the threat that republicans are going to default on our debt. if we can get that behind us, he's happy to continue to move forward. he always has been: >> does it make sense if someone were to say we're going to increase the debt limit and put government back in the business for the next month, four weeks only. we'll set up a super committee or some process, is that a good

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outcome? >> i don't think it's a good outcome. is it a possible outcome? we'll have to look at details. here's the main point. i want to give you this hypothetical. what if the president were to say he was going to veto the bill to pay our bills on time, veto a bill to raise the debt ceiling unless the republicans gave the president his entire packa package. you know as well as i do, republicans on the hill would be absolutely howling. they would say that was abuse of process. yet that's how they want to position negotiations. they want to say if you don't allow us the budget changes the way we want them, then we're going to default on debt. we're saying put that aside and we should have that budget negotiation that we've been calling for since march. >> there's middle grounds somewhere. when i heard the president yesterday and he said what if

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the democrats held the country hostage because they wanted gun control or immigration or something, we would never do that. it still rings in my ears the way the affordable care act was passed. not a single republican vote. you did did do something that was a huge deal for all of us in terms of the impact on the economy. 18 percent of the economy. that's got a lot to do with the current economy we're in now. everybody has to look and realize we all have scars at this point. the president doesn't want to be the first in history to have a default under his watch. i know these guys seem unreasonable and they think the president seems unreasonable. we've got to do this and rise above. >> we do have to find a way to get through you this. look, as you know, the health care bill was passed with the majority in the congress.

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>> there you go. >> but not a single republican vote. you had to do reconciliation and lost ted kennedy's seat. that was ugly. >> you can love it or hate it, but we didn't say we're going to default on debt unless you pass the affordable care act. >> but the deal with the nebraska -- >> you know there's a distinction -- >> it was ugly. >> i know. but you did ram pit down the republicans throats. >> this is fully litigated in the presidential election. >> let's -- what we need to do and i think we all agree we should have a negotiation on the budget. let's put it aside the the clubs of government shutdown and club of default and have what we should have had all along, the budget negotiation. >> while we have you quick, janet yellen, easy confirmation, going to be a breeze is this what's your sense?

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>> i think it's going to be relatively easy. i think there will be voices of opposition. >> we're going to have bob corker on the program in 20 minutes or less. we've heard he's against her nomination. >> well, as you know, she's got a stellar background and record, experience to do sense is itld . some do not to think the policies have helped shelter the economy during a bad >> congressman,an thanks for joining us. >> bob corker probably has other plans. >> people can talk. >> yep. they can. >> we do everyday. >> we'll see what he says. >> god, do we talk. the planet is warming from how much we talk. we'll be quiet.

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final talk from our guest host. boone pickens joins us and senator bob corker also joining us to talk about janet yellen and why he voted against her as vice chair. we have former disney ceo up also, michael eisner. [ banker ] sydney needed some financial guidance so she could take her dream to the next level. so we talked about her options. her valuable assets were staying. and selling her car wouldn't fly. we helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today... and tomorrow. so let's see what we can do about that...

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we'll get final thoughts

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from guest hosts. martin sass, couple of themes, one is consolidation. what's your best idea there? the you new idea here i accumulated since the last time i was on your program, sinclair brother casting, sbgi, the leading con sol day tore of tv stations in the united states. they have 172 mid and small size tv stations up from 58 two and a half years ago. these are acquisitions that benefit from retransmission fees going up at a big rate. they have a hidden asset in spectrum. new technology will allow tv broadcasting direct to smart phones. that's a kicker not recognized in the name. >> where do the adt and capitol one?

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>> that's another thing. capital deployment by companies to reward shareholders with increases in dividends and big share buy backs. dividends are up in the third quarter for the s&p 500 company. new record high. adt we think will buy back 23% of market cap by the end -- >> capitol one is another big buy back dividend story. they'll raise 30 to 50 cents in the second quarter of 2014 and announce $2 billion worth of buy backs. we find that a compelling fact. >> last time you were on you mentioned u.s. air and hertz. both have moved. still makes sense? >> yes. they both fit in the theme of industry transforming consolidations benefits from massive mma that shrunk players

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in the industry. we have three major players in car rental. hertz, enterprise, avis. resulting in improving pricing. in the case of airlines, three big carriers assuming the deal with u.s. air and american goes through. and then we'll have united, delta and american. >> all have done well since you left. 40 years in the business. you don't know what you've done over that period of time. >> over a 40 year period? >> if someone decides to go with m mdcs you minimize down markets? >> we're 400 basis points a year on average. >> 400 basis points above s&p

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500. >> compounded annually since inception. >> that's awesome. >> some people think we're stuck at 7 or 8% long term? >> overall for the market concerns yeah i buy into that. >> but 12 with you then is this. >> i would hope. >> thank you. appreciate it. >> great to have you. >> thank you. when we return, legendary investor boone pickens helps us rise above the debt tlechlt and senator bob corker on janet yellen as fed chair. and the art of compromise, former ceo from disney michael eisner. he'll talk about what it takes to get a deal done and what washington could learn from corporates. your retirement. ♪ ameriprise advisors can help you like they've helped millions of others. listening, planning, working one on one.

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the pick is in for the 2014 fed chair nomination. president barack obama selects janet yellen. senator bob corker tells us why he doesn't think yellen is right for the job. >> the art of the compromise. >> 30%, that's three of us. that's fair. >> we'll talk to former disney ceo michael eisner about the lack of negotiation in

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washington. chief geithner's former chief of staff tells us the three options the u.s. has if we reach without a deal. spoiler alert, all you three options are bad. the third hour of "squawk box" begins right now. welcome back to "squawk box" on cnbc. first and business worldwide. i'm joe along with becky quick and andrew. let's get a check on the market this morning. tough to say what's behind it. it was up 40 to 50 earlier. i'd like a bill more. that might not hold up depending on the news out of washington after what has been a six or 700 point sell off so far on s.

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this is after we found out janet yellen would indeed become the chairwoman. chairman, chair? >> chair of the federal reserve. >> our top story this morning is that president barack obama will be nominating yellen to replace bernanke as the chairman of the federal reserve. steve joins us now to break it down. >> i don't know what they want to be called. they can be the chairman or chairwoman. >> lisa was what? >> chair bear. >> i'm not sure if she really liked that. >> she was always a good sport. assuming yellen is approved by the committee, the question is when she might take over. her first chair following likely to be march 18, 2014. bernanke's term expires january

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31st. obama nominated yellen. it begins 2014. bernanke could step down and yellen could serve as acting chair. that's unlikely bernanke will do it. he'll hang around. that's usually the practice because what of the calendar terms out there. we talked about how important communication is to yellen. hard to overemphasize she's the fed 's federal guidance on interest rates promising to keep rates low for a long time. this is a tool almost more important than quantitative easing itself. here's a quote from her. the effects of today's monetary policy actions are largely due to effect they have on expectations about over the median term. a lot from her on that topic. look at her background. fed vice chair 2010. san francisco fed president

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2004-2010. she was in the clinton white house as fed cea 1994-97. berkeley faculty member since 1980. she sees the communications. i know there are problems with it. i think she sees it as a work in progress. fed has taken several monumental steps here putting instead of calendar dates, have gone to numerical targets on unemployment and inflation. she thinks it's more important they tell the markets what will do which has as much effect than what they actually do. that's a new thing over the last couple of years. if she says she's prepared to keep interest rates at 0 through 2016, at the same time she's talking about tapering, how much of the message gets mixed in? will she take blame for what's taking place in this process? >> bernanke struggled. feds struggled with that. this seems like it's separating.

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the plan for quantitative easing with interest rates. she's been firm with the leadership at the fed that the tapering is not tight inning. en they know they need to fine tune that. >> now talking about the pick and timing. bob corker, senator, your opposition to mrs. yellen. i think if i could rephrase this, because she's too dovish. the one thing market guys have been since like 800, i'm just early. has there been evidence she was incorrect or something bad has happened from being too dovish up until this point? we haven't seen inflation or any reason to say you were right about her being too dovish at this point. >> yeah, look, i i felt like she

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was not particularly modest about the role of monetary policy in the economy. i don't see evidence that that's changed. as i mentioned, i'm going to look at her record. there's not much there to discern. she hasn't given a lot of talks and there aren't a lot of talks. at the end of the day, trade is half way home. it's hard to say the effects. this is going to be a humphrey hawkins meeting if you will, with a vote. i want to understand how she expects to get out of the trade, why wasn't there tapering that took place, when will it take place? evidence if quantitative easing is working relative to employment. i want to make sure she doesn't view herself as an enabler of bad policy within the congress itself. this ought to be an interesting

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hearing. i look forward to hearing what her views are. i've seen nothing to change my view of where she is relative to monetary policy in the last two to three years. >> that's the thing about the confirmations. there's nothing wrong with -- she loves transparency. there will be a lot of people that say definitively the line share of the evidence is that it was the right move to be dovish when she was. it's coming at it from a position where people say, for an intellect wul argument it's okay but she was right. >> it's like halftime in the national championship handing off to a new player. i think this is a good opportunity. >> you know alabama is going to win. >> i don't know. we'll see. >> they seem to.

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>> this is an interesting time for this handoff. i know the current chairman has talked about his outstanding record relative to inhim. i have a lot of respect for him. she's going to have a lot of pressure. imf came out yesterday with the report putting pressure on the fed to keep easy money in place. again, i do really look forward to hearings. she wasn't someone i could support back in 2010. i doubt that's going to change. the fact is the president looks like he's consolidated his base. i don't know how tough her nomination will actually be. there are a lot of issues for us to focus on now. i'm glad this is coming up. >> senator, who would you have supported? any other names mentioned, were you more in favor of them? >> yeah. we've always made a habit of not

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commenting on people were not nominated, if you will. let's face it, in line up of folks that the current president would consider nominating, there probably weren't folks that were more along my line of thinking. i'm more of a eat your vegetables kind of guy. i think we've got things in washington we need to address. i'm not the chocolate pie kind of guy. that's where we've been for a long time. some of that is because of the irresponsibility we've had here in congress. i am beginning to be hopeful regarding our current situation. it looks like the house is beginning to focus on the right things. look, i'm getting a little energize had the we might talk about reforms to put our congress on a solid course. i'm beginning to feel

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optimistic. >> you think there will be a settlement reached before or on the 17th? >> i don't know. i don't see the end yet although beginning to be as i mentioned more optimistic. i don't know if we'll be done by the 17th. i think that's a date that's been established. everyone knows the treasury usually gives themselves a little room in the event these things get messy. look at paul ed in this wall street journal beginning to talk about the right kinds of things today in the washington post. i think we're beginning to now move in the right direction. i hope this will be about the fiscal reforms necessary to put our country back on track. if we were do to that, it would ease pressure on the feds. >> you said the treasury gives itself a little bit of room. are you suggesting jack lew is lying about the 17th being a hard deadline? >> no, not at all. in some cases in the past, the

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treasury has given itself 60 days leeway. in this case i don't think he's giving himself that much time. there's a date november 1st where a lot is happening. i think any treasury official would be committing malpractice if they didn't give themselves a few days knowing how congress and the administration doesn't particularly work well together. no, not at all. he's probably established a psychological date, if you will, of the 17th. >> but the world falls apart on the 18th and payments do not go out? >> we don't have evidence of that being the case. let me say this to you. i think debt ceilings are important dates. i don't want to minimize the importance of us acting in an appropriate way.

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i think around the 13th of this month, things are going to get volatile if we're not moving closer to a deal. a treasury secretary would be committing malpractice if they established midnight on the 17th. >> we all know what you're saying. >> one last thing quick. do you believe that yellen gets passed? >> i shouldn't say this, but in all likelihood she will. i think that most democratic senators are going to support her. they're likely. i don't know where our side of the aisle is. i certainly haven't we want. i will say this to you and your listening audience which cares greatly now about monetary policy. this will be the most enlightening hearing in modern history. we're half way through the trade. i think this will be very important to our country and to the world and i look forward. hopefully she'll be transparent in answers.

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i think this is going to be an important process. >> i was trying to fig our out the last time volunteers were in the national. i've got to go way back. >> good game against georgia. >> you did yourself proud. did you win in 98, the national title? >> i think that was the last year. >> i think you did. i like your new coach. i think he came from cincinnati. >> he's a good man. he's another one of those eat your vegetables kind of guys. she's building from the foundation up. let's face it. that's where we need to be in washington. >> that was smooth man. you're picking this up really quickly. >> i'm learning from the pros. there's none better than watching you each morning. >> we love being with bob corker in the morning. thank you senator. see you later. >> appreciate it. in our corporate headlines, $2.3 billion take over in the retail industry.

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joseph a. bank is offering $48 per share to buy men's warehouse. the company in the news recently when it ousted the founder and commercial from the board. jcpenney announcing stephen sadove will join the board of directors. he's planning to leave sax after the plan is completed. we have a big line up still to come. former chief of staff, he will give us the opinions. we'll talk to former ceo of disney and the art of compromise. boone pickens will talk energy, debt crisis and more. he's our guest host the rest of the show. [ male announcer ] eeny, meeny, miny, go. ♪ ♪

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gridlock in washington continues to rattle the markets as the government shutdown enters the ninth day. we are going to cover that and much more this hour. joining us the rest of the show, founder of bp capital management, boone pickens. you've spent time in washington

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the last five and a half years. >> spent a lot of money. >> are you surprised in terms of the government shutdown and debt ceiling debate? >> in 1990 i almost got in politics. i was going to run for governor of texas. thank god i never got in politics. that is the worst business that you could possibly get involved in i believe. it would drive me crazy if i was there and couldn't make anything happen. >> that's a bad sign. people that do get in, there must be something wrong with them. then we're left with them to run. >> i'm not going to comment. >> new york has 9 million people. did you see our picks for new york who it came down to? anthony weiner. >> i think that guy was misunderstood. >> well, you know what, as they say, i'm not going to touch that or his. any way, go ahead. >> i don't know where to go with

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that. >> okay. so you wouldn't have gotten into politics. what do you make of what's happening? both sides at fault here? >> i don't know. they keep talking about debt ceiling and everything else as if it's the only time we've had a debt ceiling. that's not the case. i went back and looked. there have been 40 some odd times that this question has come up to congress and president of the united states, democrats and republicans. i don't know. i don't understand it. for me to try to give an opinion on it looks like it's a mess. >> all right. >> let's talk about what you do know about. the oil and gas, energy business. we've saw last week, the united states is now on track to become the number one oil and gas producer in the world. >> can you believe that? >> they said we couldn't do it.

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they said trying to develop domestic supplies is fruitle. remember? >> sure. you should put canada, united states and mexico together. you could give mexico a great deal of help. loan them money, get a call on the oil, they repay the debt. that's simple. that could be done in a business world like that. i'm not sure in a political environment whether it's doable or not. canadians are independent. they know what they're doing. they have plenty of technology in their country. they have a great amount of oil. interesting, if you take the oil at fort mcmurray. canadians say they have 250 billion barrels. that's exactly what the saldives

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claim they have. i don't think they do. we're sitting here with the pipeline ready to come to us. >> you're ready to do keystone? to build hydrocarbon infrastructure with what you know? >> yeah. >> we've discussed this before. >> you're coming around. i never came around. >> we're not going to do it. it's unlikely we will:i've seen something about stire. i read he's against keystone and has a pipeline or -- i could get sued for slander. i read it where. >> tom has hooked up with bloomberg and pullson for a climate change program. >> let me go on that subject.

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you're sitting there with the same amount of oil available to the united states from canada. you're sitting there with the same amount in saudi arabia. what do we get out of 17 million barrels? 10%. the navy is shepherding a cartel from china and yumpt we geurope. we get 10%. >> the president has red ford. do you think he'll say do it? >> you remember what the president said. i was at the democrat convention. the only democratic convention in denver i've been to when he

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accepted nomination. you know what he said, andrew? he said in ten years we will not import oil from the mideast. he's never said it again. if he has, i didn't hear it. when he said it, i promise i almost fell out of my chair. >> the foreign policy implications of him saying that repeatedly could create his poen probl -- his own problem, right? >> i don't know what it could create. he's never said it again. >> i think he would have done it by now. that would surprise me. >> they would want him to take the oil from the mideast. >> i'm saying he gave the speech on climate change which was a huge speech. with what's happening with the epa and coal plant, it would fly in the face in terms of environmental issues for him to

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do that. >> now he can say we're great producers already. >> it's a no brainer. that's the whole crazy thing about it in terms of jobs and everything else. it's ridiculous not to do it. i'm not convinced he's going to. >> he hasn't said anything about it. you give yourself an option if you wanted to pull a fifth fleet out of the persian gulf. you take people at risk out of there. the whole thing to me is an option we could focus on. put together the north american alliance or joe put the 8 million trucks on natural gas. that knocks out 75%. >> we're going to talk more about the pickens plan and where it stands. you're still going back to washington to talk about these things. >> every time i leave there i say i'm t not coming back. i always do. >> boone is coming back here and going to be with us the rest of

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the hour. we have more to talk about. coming up we're going to talk about the government shutdown and art of the compromise with the washington insider and well known business leader, mark patterson. he's going to join us to talk about the treasury department's options. and former ceo of disney michael eisner. he knows about negotiating. he's going to talk about the debt battle in washington. stick around for that and more.

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welcome back to "squawk box" everyone. all things d reports, apple will hold the fall event october 22. we have the fifth generation ipad expected to feature thinner, lighter design and run apple's new chip. no word on whether the device will incorporate the touch sensor that recently debuted on the new 5s. if congress fails to raise the debt ceiling by september 17th, there's a spoiler alert for you. none of the options are good.

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u.s. is approaching the debt limit. prospects for a deal to avoid default are slim. joining us now to talk about the situation if the house fails to reach a deal. now senior fellow at the center

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for american progress. good morning. again, we had senator corker on. can you just tell us for sure the date. it's not the 17th. is it the 1st. >> the 17 th is the date after which the treasury cannot guarantee it can pay all bills. some define the date differently and say what is the date the treasury is out of cash? treasury never said out of cash on the 17thimated their mo. that's run if you're a small business and had a lot of checks outstanding and payments coming in that were variable and uncertain, you wouldn't want $30 in your checking account. that's a small amount. no telling how long it will last. payments that come and go. here's one thing people are now

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f focussing on. all that maturing debt comes in. investors can reinvest in the new treasury or say i'll take my cash and put it somewhere else. people are not focussing on that point. that's one of the reasons you can't do this prioritization. >> there's a difference in the argument and how far past we can go because they leave a cushion. >> the point is once you get to a place where the world feels like we're in a crisis and lose confidence in the u.s., it could come at any point. even the first week, if we suddenly had trouble with auctions, the treasury does not have the extra $100 billion. >> if it's the 18th and going to come within a couple of days, probably wouldn't be a problem. >> depends on how much comes in

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with ordinary tax payments. >> in the course of a month not a week. the point is you shouldn't count on that. you don't want to run the treasury to 0. no business would operate that way. no operates that way out of their personal checkbook. >> when bob says there's wiggle room -- >> what's the point? people fail to realize that. that's a low cash balance $30 billion. that's low for the treasury. it ought to be 50 or more in my opinion. i would take that date seriously. after it, you can't guarantee anything. do you want to risk the effects day after day after that? maybe they can go longer but why would you risk that. >> what are the three bad options? >> if the debt limit is not raised, and i do not know what

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the president and secretary of treasury would decide, but the basic options are hair cut all your payments, try to pick and choose payments. a lot of people pointed out that's a hard exercise with no basis to do it and probably logistically impossible. or delay payments. that's the only option when short of cash. every one of them is going to spread pain across the economy including pain on individuals like social security recipients. one-third of recipients in this country rely 100% on that check for living expenses. if they're not getting paid on time, they're not paying for food, medicine, things like that. votes are there on the house to raise it today. i don't believe there's a question. >> you know mark that i take social security? does that surprise you?

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>> no. >> i paid so much into social security i'm going to take it. >> some come on and say they want to take it. others come on and say i'll give it back. i don't care. >> i give it away. i want it. >> you want it to then give away. >> that's the contributory social insurance system not welfare. those are your benefits. >> that's exactly how i'm going to see it. i'm going to get my money. >> they're not going to bring it to a vote. >> not right away. >> there's a glimmer. everybody is talking about the glimmer. have you heard about it? >> i've been involved in a lot of debt increases in my life unfortunately. i'm increasingly worried. >> were you involved in the one the president made a couple of years ago? >> sometimes people make a mistake and don't own up to it. the president did that. >> just saying i made a mistake

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now, doesn't mean he didn't at the type. i've got the document explaining what his reasoning was, i don't want to give debt to our children. i thought it made since at the time. >> i understand. i've been involved in a whole bunch over 20 years in public service. up until recently thought out with rules. both sides punched each other. at the end, everybody knew the debt limit was going up. >> how is this different? >> this is different. it's because you have a group of people, a disturbing article on the front page of the times today about this, they basically deny default is a problem. they're prepared to test it out. >> those aren't the leaders. >> but unfortunately leaders don't have control of the ship now. >> how did you feel about the wall street journal by paul

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ryan? >> he made good points. the the basic problem is -- i said this to boone in the green room. if there were a democratic house, and they said mr. president reagan or whoever it was, we're going to default and throw this country into a default unless you pass sweeping gun control reforms. what would president reagan say? pound sand and correctly so. the threat of the default has been taken too far as a piece of leverage. >> democrats passed obama care without a single republican vote. now there's different tactics that didn't involve the default and debt ceiling. it involved reconciliation, sweet deals to get certain democrats on the side. it involved a lot of things that are still coming back to haunt or poison the water in washington right now. saying oh you could never pass

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gun control. democrats yuan lateral ri passed obama care affecting 18 percent of the economy. there's bad blood out. >> you're complaining about the democratic process. that was passed both through houses. >> you're stretching the democratic process. you lost the senate majority and had put a crappy bill through because you couldn't fix it. >> both parties use the reconciliation process. >> you reap what you sow. >> i think the connection between obama care and the shutdown and/or the debt limit is a giant strategic mistake. that's what carl rose says, john mccain says. >> there's a reason the tea party was spawned and the reason it's a poisonous atmosphere now. democrats have some share of the blame. that's my only blame. thank you. you've got to hear this stuff.

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you could be on fox and hear this right? >> appreciate you. more now from our guest host. we were talking about energy prices. this morning oil is trading $103.50. is that a fair price given all that's taking place in america now? >> fair price, do you think that the oil market is a free market? >> well this is a question. i was going to come back to the pickens plan and opposition you've gotten from it. people say free market should take over and you shouldn't get subsidies. what's your reaction today that? >> opec controls the global oil price. they produce 30 million. that makes them the swing producer. they will control a price by supply. when you see the administer of

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energy say we have to have $100 a barrel or $105. he's not kidding. they have social commitments within the country that have to be met. it doesn't make a difference what it cost them to produce. it's a commitment they have for when they do produce. so you're sitting here okay now we are really doing a great job increasing production in the united states, 2 million barrels in the last three years. all of that is real. the industry in america is so far ahead of the industry globally that it's unbelievable what we've done. >> technology wise? >> yes. >> they are so far ahead of the rest of the world. poland had all the right shell ingredients to be a great shell gas deal. what happened? they couldn't get anything out of the shell.

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they've written off poland pretty well. it's wiped out. francisco says you can't frack. the industry in america has done an overwhelming job. if you want to criticize, they created too many jobs. >> you know what you're saying once again, i was right about pico. >> you were. >> i was right, and you were wrong. >> the hydrocarbon age will not end when we run out. just like the stone able. hopefully we're doing something else cleaner and bla bla. >> i'm not arguing with you. you didn't know about the shell deal. >> i was just saying --

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actually you didn't know what you were talking about. you got lucky. >> it happens all the time. >> i knew what i was talking about and i was wrong. i don't want to know too much about anything because i'd be wrong. >> you remember when we were worried about manure in new york city going to be nine feet high because of horses running on carriages. that never happened. we moved onto something else. that will happen eventually right? >> technologically we'll find something else. the one thing i worry about is big jets. they're always going to have to run on jet fuel. >> some believe one day there will be battery powered planes. >> i'm not testing those. >> listen, i'm never -- >> you're never going on that plane? >> i didn't say that. you're getting ready to talk to

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somebody on airlines aren't you? >> michaele eisner on. he flies private. he'll know about this. i don't think he has a battery powered plane. i wouldn't say i i wouldn't fly on a plane with a battery. i'm 85 years old. i don't think they'll have a battery for another 25 years. i won't have the option. >> he's got the crazy train that goes to la. >> i hope in my lifetime there are battery powered planes. it's possible. >> you're a nervous liar now. >> we're going to have much more from boone pickens straight ahead. we're going to ask a well known business leader about the president's pick for chairman. michael eisner is here right after this.

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welcome back. lawmakers in washington remaining deadlocked over the nation's budget. what will it take for leaders to rise above politics and work out a compromise? joining us now, former ceo of disney michael eisner. i never pronounced your company's name. >> michael joins us from los

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angeles:you've been on the different sides of tough deals. if you're president barack obama or mr. boehner, what do you do? >> i've never negotiated in the kind of gangster mode in which we make motion pictures, like the god father. i've never negotiated when somebody came in and said, put a gun to your head and said i'm going to take you down and your whole family down, the country, unless you do what i want. that's not the proper way to negotiate. it's not civil, not ethical. it seems to be what's going on. if somebody came to me with a script, i the god father, the script sequel to it what's going on in washington. i'd saying this simple. it's fiction, can't happen. you can't do that in this country. you can't put a gun to somebody's head and say, now or

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never. so what its done is undermined the psychological comfort of the country. we live on the earth, gravity, feel comfortable unless there's an earthquake. we breathe the air, feel comfortable unless we end up in beijing in a bad smog situation. we have a great faith in the financial stability of the country, our treasury. when you undermine that, you undermine comfort, create fear. you create panic. it's already happened. cannot be undone. it continues. the fear and panic will escalate. >> let's consider this a dual and guns drawn on both sides here. what do you do? you have dealt with people on the opposite side i imagine you thought were horrible and difficult depending on which side of the aisle you come to this. i imagine that's how people peel. how do you deal with the other

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side? >> i'm not saying the democrats have handled everything perfectly nor have republicans. i have never dealt, in 40 years of negotiations in america, with somebody coming to me putting a gun to my head saying do it my way or you're dead and your whole family is dead. that's not the way to negotiate. to anybody in business who's ever negotiated where you put the whole institution at risk. it's absurd. frankly, shame on congress. it's not the way you operate. you, in our society, it's unacceptable. there are places all over the world that operate had the way. we made movies that are popular about it. it's not the way to deal. >> michael, who will ultimately

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take the blame? more importantly what's the implication of that blame? the picture painted is that republicans will take the blame for this. we were talking during the commercial break. i don't know how many republicans out there who are perhaps parts of their own party say to themselves who say, you know what, next time i'm going to vote for a democrat. do you think that's what happens? >> you have a character like fredo in "the godfather," who is too weak to go after the minority. ion how they operate. i don't think the president has a great bunch of opportunities. he doesn't want to be the first president that actually in advance knowingly puts the company in default. at the same time if he folds to this kind of threat, he is a

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weak man and he's dealing with a weak man who does not have the moral fiber to stand up to a majority -- to a minority in his party and say, hey, guys, we can negotiate what we have to negotiate later. let's leave threats off the table. let's not operate that way. it's just not -- it's not a civil way to operate. in my opinion. >> michael, before we let you go tonight, the california organization unsung hero ceremony is taking place and there is a michael eisner award. what does that mean? >> we give $150,000 to the best nonprofit who takes the best multi-generational project and

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seniors and youngsters living in a community house where seniors get a sense of importance, reading to kids, kids have a place to live. in intergenerational togetherness we think is an important step in solving a few of america's problems so we give a gift, a prize and we're giving it for the first time in l.a. to the motion picture television fund, which does an excellent job of bringing high school and grade school kids working with very old ex-entertainment executives making short films and things like that. >> michael, it's a great prize. we appreciate you joining us. we hope the movie going on in washington has a happy ending but we'll see what happens. >> i think it will. >> coming up -- >> we definitely got a view of -- hollywood's view on politics. for that we thank -- if you had any doubt about hollywood's view, there it was. thank you. >> coming up, we will have much more from our guest host boone

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pickens. stick around.

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our guest host has been boone pickens. we'll give him the last word when we come back.

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let's get back to our guest host boone pickens. we haven't talked to you since forbes knocked you off of the

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billionaires list. you're not broke? >> no. i can give it to you quick. i hit $4 billion. i gave away one. i lost one and one two. >> you make big bets. >> that was part of it. the market got me in '08, '09 is where i took the big hits. don't worry, i'll be back. >> you made billions and lost them before? >> yes. >> can i say something about negotiations in washington? >> yes. >> you can't expect someone who not used to negotiating to feel comfortable of negotiating the first time. you're talking about a president who has no history of negotiating. and you're talking about michael eisner who negotiates a lot of things in business, just like i do. but here you got a buy that's never been to the negotiating table and he doesn't want to go.

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now that's the way i see the thing sorting out. >> unfortunately, i think -- unfortunately -- both sides haven't been spending a lot of time at the table. >> we have divided government. one person hasn't been told about that there are actually other people involved in governing. >> i think it's a both sides thing but boone pickens, thank you. it was a lot fun. join us tomorrow. stre "squawk on the street" begins right now. good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla here with jim cramer. david faber is at the barefoot economic summit in texas. we'll talk to kyle bass a little later this morning. we await the formal nomination of janet yellen as formal